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A company has current assets of Rs. 5,20,000 and current liabilities of Rs. 2,60,000. Calculate its current ratio.

easy 1 mark Class 12 · Accountancy · Analysis of Financial Statements
Answer
Current Ratio = 2.00 (or 2:1)

The correct answer is Current Ratio = 2.00 (or 2:1) — Therefore the current ratio is 2.00, i.e., 2:1.

Step-by-step solution

  1. Current ratio is defined as Current Assets ÷ Current Liabilities.
  2. Substitute the given values: 5,20,000 ÷ 2,60,000.
  3. Perform the division: 5,20,000 ÷ 2,60,000 = 2.00.
  4. Therefore the current ratio is 2.00, i.e., 2:1.
Common mistake: Using total assets instead of current assets

Concept tested: Current ratio calculation

Published · How this solution was prepared and checked

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